Monday, December 1, 2008

The second chapter of the report focuses on a topic that I feel has large implications on societies - past, present and future - and in the coming years will have distinct effects. It has been said that "Demography is Everything", and I feel the report captures several interesting trends that will shape our world.

Two of these trends include:

Urbanization

Aging Populations in Developed Nations

Urbanization

If current trends persist, by 2025 about 57 percent of the world’s population will live in urban areas, up from about 50 percent today. By 2025, the world will add another eight megacities to the current list of 19—all except one of these eight will be in Asia and Sub-Saharan Africa. Most urban growth, however, will occur in smaller cities of these regions, which are expanding along highways and coalescing near crossroads and coastlines, often without formal sector job growth and without adequate services.

Increased urbanization will have implications in maintaining access to food and clean water. The ability for these megacites to absorb new citizens will also be key. Large groups of unemployed, hungry, and disaffected people are highly unstable and prone to revolt and/or terrorism. These groups could push more and more failing states over the edge.

Aging Populations

Rapidly aging populations will have profound impacts on society. As retirees have fewer and fewer workers for support, a shift will have to occur. Either the society will increase fertility (much easier said than done), import workers through immigration, or benefits and support for the elderly will have to be reduced commensurately. Each of the options have implications on the stability of the nation or region.

In almost every developed country, the period of most rapid growth in the ratio of seniors (age 65 and older) to the working-age population will occur during the 2010s and 2020s, boosting the fiscal burden of old-age benefit programs. By 2010, there will be about one senior for every four working-age people in the developed world. By 2025, this ratio will have climbed to one to three, and possibly higher.

Large and sustained increases in the fertility rate, even if they began now, would not reverse the aging trend for decades in Europe and Japan. If fertility rose immediately to the replacement level in Western Europe, the ratio of seniors to people in their working years would continue to rise steadily through the late 2030s. In Japan, it would continue to rise through the late 2040s.

The annual level of net immigration would have to double or triple to keep working-age populations from shrinking in Western Europe. By 2025, non-European minority populations could reach significant proportions—15 percent or more—in nearly all Western European countries and will have a substantially younger age structure than the native population (see page 20). Given growing discontent with current levels of immigrants among native Europeans, such steep increases are likely to heighten tensions.

The aging of societies will have economic consequences. Even with productivity increases, slower employment growth from a shrinking work force probably will reduce Europe’s already tepid GDP growth by 1 percent. By the 2030s, Japan’s GDP growth is projected to drop to near zero according to some models. The cost of trying to maintain pensions and health coverage will squeeze out expenditures on other priorities, such as defense.

As I examined here, the U.S. will be (perhaps already are?) facing a serious economic crossroads with regards to our social entitlement programs. It will take strong leadership, clear vision, and the ability for all parties to compromise in order to solve these complex problems. Many in my cohort are assuming Social Security will not be around for retirement and are planning accordingly. This is probably a good idea, but what about the many millions who are not?